TMI Blog1988 (11) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case, the dollar revaluation reserves appearing in the balance-sheet of the assessee company as on the first day of the respective years relevant to 1968-69 and 1969-70 assessment years constitute reserves which were includible in the capital base under the Second Schedule to the Companies (Profits) Surtax Act, 1964 ?" Counsel are agreed that the issue in the first question is concluded by the judgment of the Supreme Court in Vazir Sultan Tobacco Co. Ltd. v. CIT [1981] 132 ITR 559. The Tribunal shall assess what part of the gratuity reserve is a provision towards an existing liability and give relief in respect thereof. The issue in the second question is contested. The facts in relation thereto are these. A part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rules for computing the capital of company and its relevant portions, for the purposes of this reference, are these : "1. Subject to the other provisions contained in this Schedule, the capital of a company shall be the aggregate of the amounts, as on the first day of the previous year relevant to the assessment year, of (i) its paid-up share capital ; ... 2. Where a company owns any assets the income from which in accordance with clause (iii) or clause (vi) or clause (viii) of rule 1 of the First Schedule is required to be excluded from its total income in computing its chargeable profits, the amount of its capital as computed under rule 1 of this Schedule shall be diminished by the cost to it of the said assets as on the first da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the same. That increase in the rupee value of the same amount of American dollars had to be reflected in the assessee's books maintained in India in Indian rupees. This was done by crediting the increased sum of Rs. 18,22,214 to an account called "dollar revaluation reserve". This was, therefore, clearly not a case where the assessee had revalued a book asset within the meaning of Explanation I to rule 2. This increase in the rupee value was an increase in its paid-up share capital in rupees and remained includible in the computation of its capital base. We are fortified in this view by the decision of the Andhra Pradesh High Court in CIT v. Warner Hindustan Ltd. [1986] 158 ITR 51. In that case too, the assessee's foreign collaborators ..... X X X X Extracts X X X X X X X X Extracts X X X X
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